3 ways to profit from a weaker Australian dollar

The Australian dollar has continued its decline against the U.S. dollar overnight after the greenback strengthened following the release of U.S. fourth-quarter GDP data which came in ahead of expectations.

According to the Wall Street Journal, U.S. GDP rose at a 2.9% annual rate in the fourth-quarter, compared to expectations of 2.7% growth.

This has left the Australian dollar trading at 76.6 U.S. cents, its lowest level in 2018.

I believe this is the start of even greater declines for the Australian dollar over the next 12 to 24 months as rising U.S. rates cause the U.S. dollar to strengthen at long last.

With that in mind, now could be a good time to consider buying shares which would benefit from a weaker local currency. Three that I like are listed below:

Appen Ltd (ASX: APX)

This machine learning and artificial intelligence dataset provider has been one of the best performers on the local share market over the last 12 months. It isn’t hard to see why. Despite the stronger Australian dollar, in FY 2017 Appen delivered underlying EBITDA of $28.1 million. This was an increase of 62% year-on-year or 73% in constant currency terms. If the Australian dollar weakens I would expect Appen to benefit greatly due to the large amount of revenue generated in North America.

Aristocrat Leisure Limited (ASX: ALL)

This gaming technology company is one of my favourite growth shares on the local share market. I expect it to deliver explosive earnings growth over the next few years regardless of any favourable movements in the AUD/USD cross. But should the local currency weaken, then it could give Aristocrat an extra boost. In FY 2017 approximately 58.1% of its revenue came from the Americas region. I expect an even greater amount will be generated in the region in the future following the recent acquisitions of Plarium and Big Fish.

Integrated Research Limited (ASX: IRI)

I’m a big fan of this provider of performance monitoring and diagnostics software solutions for business-critical computing environments. So too are U.S. companies it would seem. At present all ten of the largest U.S. banks use Integrated Research’s software, as do five of the world’s largest companies. This has unsurprisingly led to a significant portion of its revenue being generated in the Americas. In its half-year results, the company reported revenue of approximately US$24.2 million (A$31.6 billion) in the Americas region, which equates to 69% of its A$45.7 million half-year revenue. If the Australian dollar were to weaken, Integrated Research would almost certainly benefit.

Here are three more top shares that could benefit from a weaker dollar as well.

Top 3 ASX Blue Chips To Buy In 2018

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2018."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Appen Ltd. The Motley Fool Australia has recommended Integrated Research Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.